VORNADO REALTY TRUST

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our consolidated financial statements for the three months ended March 31, 2024. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full year. Certain prior year balances have been reclassified in order to conform to the current year presentation.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our consolidated financial statements for the three and six months ended June 30, 2024. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results for the full year. Certain prior year balances have been reclassified in order to conform to the current year presentation.

Previous wording

Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P. (the “Operating Partnership”), a Delaware limited partnership. Vornado is the sole general partner of and owned approximately 91.0% of the common limited partnership interest in the Operating Partnership as of March 31, 2024. All references to the “Company,” “we,” “us” and “our” mean, collectively, Vornado, the Operating Partnership and those subsidiaries consolidated by Vornado.

Current wording

Vornado Realty Trust (“Vornado”) is a fully-integrated real estate investment trust (“REIT”) and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P. (the “Operating Partnership”), a Delaware limited partnership. Vornado is the sole general partner of and owned approximately 90.9% of the common limited partnership interest in the Operating Partnership as of June 30, 2024. All references to the “Company,” “we,” “us” and “our” mean, collectively, Vornado, the Operating Partnership and those subsidiaries consolidated by Vornado.

Previous wording

Net loss attributable to common shareholders for the quarter ended March 31, 2024 was $9,034,000, or $0.05 per diluted share, compared to net income attributable to common shareholders of $5,168,000, or $0.03 per diluted share, for the prior year’s quarter.

Current wording

Net income attributable to common shareholders for the quarter ended June 30, 2024 was $35,260,000, or $0.18 per diluted share, compared to $46,377,000, or $0.24 per diluted share, for the prior year’s quarter.

Previous wording

Funds from operations (“FFO”) attributable to common shareholders plus assumed conversions for the quarter ended March 31, 2024 was $104,129,000, or $0.53 per diluted share, compared to $119,083,000, or $0.61 per diluted share, for the prior year’s quarter. FFO attributable to common shareholders plus assumed conversions for the quarters ended March 31, 2024 and 2023 include certain items that impact the comparability of period-to-period FFO, which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, decreased FFO attributable to common shareholders plus assumed conversions for the quarter ended March 31, 2024 by $4,718,000, or $0.02 per diluted share, and increased FFO attributable to common shareholders plus assumed conversions by $2,795,000, or $0.01 per diluted share, for the quarter ended March 31, 2023.

Current wording

Funds from operations (“FFO”) attributable to common shareholders plus assumed conversions for the quarter ended June 30, 2024 was $148,944,000, or $0.76 per diluted share, compared to $144,059,000, or $0.74 per diluted share, for the prior year’s quarter. FFO attributable to common shareholders plus assumed conversions for the quarters ended June 30, 2024 and 2023 include certain items that impact the comparability of period-to-period FFO, which are listed in the table below. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO attributable to common shareholders plus assumed conversions for the quarter ended June 30, 2024 by $36,178,000, or $0.19 per diluted share, and by $3,322,000, or $0.02 per diluted share, for the quarter ended June 30, 2023.

Previous wording

Calculations of same store NOI at share, reconciliations of our net (loss) income to NOI at share, NOI at share - cash basis and FFO and the reasons we consider these non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Current wording

Calculations of same store NOI at share, reconciliations of our net income to NOI at share, NOI at share - cash basis and FFO and the reasons we consider these non-GAAP financial measures useful are provided in the following pages of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Previous wording

On April 4, 2024, a joint venture, in which we have a 50% interest, amended and extended the $1,075,000,000 mortgage loan on 280 Park Avenue. The maturity date on the amended loan was extended to September 2026, with options to fully extend to September 2028, subject to certain conditions. The interest rate on the amended loan remains at SOFR plus 1.78%. Additionally, on April 4, 2024, the joint venture amended and extended the $125,000,000 mezzanine loan, and subsequently repaid the loan for $62,500,000.

Current wording

On April 4, 2024, a joint venture, in which we have a 50% interest, amended and extended the $1,075,000,000 mortgage loan on 280 Park Avenue. The maturity date on the amended loan was extended to September 2026, with options to fully extend to September 2028, subject to certain conditions. The interest rate on the amended loan remains at SOFR plus 1.78%. On July 8, 2024, the joint venture swapped the interest rate to a fixed rate of 5.84% through September 2028. Additionally, on April 4, 2024, the joint venture amended and extended the $125,000,000 mezzanine loan, and subsequently repaid the loan for $62,500,000. In connection with the repayment of the mezzanine loan, we recognized our $31,215,000 share of the debt extinguishment gain which is included in “income from partially owned entities” on our consolidated statements of income.

Previous wording

On May 3, 2024, we extended one of our two unsecured revolving credit facilities to April 2029 (as fully extended). The new $915,000,000 facility replaces the existing $1.25 billion facility that was due to mature in April 2026. The new facility currently bears interest at a rate of SOFR plus 1.20% with a facility fee of 25 basis points. Our $1.25 billion revolving credit facility matures in December 2027 (as fully extended) and has an interest rate of SOFR plus 1.14% and a facility fee of 25 basis points.

Current wording

On May 3, 2024, we extended one of our two unsecured revolving credit facilities to April 2029 (as fully extended). The new $915,000,000 facility replaced the $1.25 billion facility that was due to mature in April 2026. The new facility currently bears interest at a rate of SOFR plus 1.20% with a facility fee of 25 basis points. Our $1.25 billion revolving credit facility matures in December 2027 (as fully extended) and has an interest rate of SOFR plus 1.15% and a facility fee of 25 basis points.

Previous wording

We entered into the following interest rate swap and cap arrangements during the three months ended March 31, 2024. See Note 13 -Fair Value Measurements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our consolidated hedging instruments:

Current wording

We entered into the following interest rate swap and cap arrangements during the six months ended June 30, 2024. See Note 14 -Fair Value Measurements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our consolidated hedging instruments:

Previous wording

On April 12, 2024, we closed on the sale of two condominium units at 220 CPS for net proceeds of $31,605,000; four units remain unsold.

Current wording

During the three and six months ended June 30, 2024, we closed on the sale of two condominium units at 220 CPS for net proceeds of $31,605,000, resulting in a financial statement net gain of $15,175,000 which is included in "net gains on disposition of wholly owned and partially owned assets" on our consolidated statements of income. In connection with these sales, $2,106,000 of income tax expense was recognized on our consolidated statements of income. Four units remain unsold, with a carrying value of $20,227,000 which is included in "other assets” on our consolidated balance sheets.

Previous wording

(1)Reflects the Office, Retail and Residential space within our 65 total New York properties as of March 31, 2024 and December 31, 2023.

Current wording

(1)Reflects the Office, Retail and Residential space within our 64 and 65 total New York properties as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

A summary of our critical accounting policies and estimates used in the preparation of our consolidated financial statements is included in Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023. For the three months ended March 31, 2024, there were no material changes to these policies.

Current wording

A summary of our critical accounting policies and estimates used in the preparation of our consolidated financial statements is included in Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023. For the six months ended June 30, 2024, there were no material changes to these policies.

Previous wording

Our revenues were $436,375,000 for the three months ended March 31, 2024 compared to $445,923,000 for the prior year’s quarter, a decrease of $9,548,000. Below are the details of the decrease by segment:

Current wording

Our revenues were $450,266,000 for the three months ended June 30, 2024 compared to $472,359,000 for the prior year’s quarter, a decrease of $22,093,000. Below are the details of the (decrease) increase by segment:

Previous wording

(2)Includes interests in Independence Plaza, Rosslyn Plaza and others.

Current wording

(5)Includes interests in Independence Plaza, Rosslyn Plaza and others.

Previous wording

Interest and debt expense for the three months ended March 31, 2024 was $90,478,000 compared to $86,237,000 for the prior year’s quarter, an increase of $4,241,000. This was primarily due to higher interest expense resulting from higher average interest rates, inclusive of the impact of our interest rate hedging instruments, partially offset by higher capitalized interest and debt expense.

Current wording

Interest and debt expense for the three months ended June 30, 2024 was $98,401,000 compared to $87,165,000 for the prior year’s quarter, an increase of $11,236,000. This was primarily due to higher average interest rates, inclusive of the impact of our interest rate hedging instruments, partially offset by higher capitalized interest and debt expense.

Previous wording

Net loss attributable to noncontrolling interests in consolidated subsidiaries was $11,982,000 for the three months ended March 31, 2024, compared to $9,928,000 for the prior year’s quarter, an increase of $2,054,000. This was primarily due to higher average interest rates on mortgage loans of our non-wholly owned consolidated subsidiaries.

Current wording

Net loss attributable to noncontrolling interests in consolidated subsidiaries was $13,890,000 for the three months ended June 30, 2024, compared to $2,781,000 for the prior year’s quarter, an increase of $11,109,000. This resulted primarily from higher average interest rates on mortgage loans of our non-wholly owned consolidated subsidiaries.

Previous wording

As of March 31, 2024, we had $3.0 billion of liquidity comprised of $1.1 billion of cash and cash equivalents and restricted cash and $1.9 billion available on our $2.5 billion revolving credit facilities. Following the May 2024 amendment and extension of one of our two revolving credit facilities, we had $2.7 billion of liquidity. The ongoing challenges posed by the increase in interest rates and inflation could adversely impact our cash flow from continuing operations but we anticipate that cash flow from continuing operations over the next twelve months together with cash balances on hand will be adequate to fund our business operations, cash distributions to unitholders of the Operating Partnership, cash dividends to our shareholders, debt amortization and recurring capital expenditures. We anticipate that we will pay a common share dividend for 2024 in the fourth quarter, subject to approval by our Board of Trustees. Capital requirements for development and redevelopment expenditures and acquisitions may require funding from borrowings, equity offerings and/or asset sales.

Current wording

As of June 30, 2024, we had $2.7 billion of liquidity comprised of $1.1 billion of cash and cash equivalents and restricted cash and $1.6 billion available on our $2.2 billion revolving credit facilities. The ongoing challenges posed by the increase in interest rates and inflation could adversely impact our cash flow from continuing operations but we anticipate that cash flow from continuing operations over the next twelve months together with cash balances on hand will be adequate to fund our business operations, cash distributions to unitholders of the Operating Partnership, cash dividends to our shareholders, debt amortization and recurring capital expenditures. We anticipate that we will pay a common share dividend for 2024 in the fourth quarter, subject to approval by our Board of Trustees. Capital requirements for development and redevelopment expenditures and acquisitions may require funding from borrowings, equity offerings and/or asset sales.

Previous wording

Cash and cash equivalents and restricted cash was $1,148,920,000 as of March 31, 2024, a $112,664,000 decrease from the balance as of December 31, 2023.

Current wording

Cash and cash equivalents and restricted cash was $1,116,854,000 as of June 30, 2024, a $144,730,000 decrease from the balance as of December 31, 2023.

Previous wording

Net cash provided by operating activities primarily consists of cash inflows from rental revenues and operating distributions from our unconsolidated partially owned entities less cash outflows for property expenses, general and administrative expenses and interest expense. For the three months ended March 31, 2024, net cash provided by operating activities of $31,485,000 was comprised of $140,859,000 of cash from operations, including distributions of income from partially owned entities of $30,438,000, and a net decrease of $109,374,000 in cash due to the timing of cash receipts and payments related to changes in operating assets and liabilities.

Current wording

Net cash provided by operating activities primarily consists of cash inflows from rental revenues and operating distributions from our unconsolidated partially owned entities less cash outflows for property expenses, general and administrative expenses and interest expense. For the six months ended June 30, 2024, net cash provided by operating activities of $226,164,000 was comprised of $282,855,000 of cash from operations, including distributions of income from partially owned entities of $54,618,000, and a net decrease of $56,691,000 in cash due to the timing of cash receipts and payments related to changes in operating assets and liabilities.

Previous wording

Net cash flow (used in) provided by investing activities is impacted by the timing and extent of our development, capital improvement, acquisition and disposition activities during the year.

Current wording

Net cash (used in) provided by investing activities is impacted by the timing and extent of our development, capital improvement, acquisition and disposition activities during the year.

Previous wording

Net cash flow used in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership as well as principal and other repayments associated with our outstanding debt.

Current wording

Net cash used in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership as well as principal and other repayments associated with our outstanding debt.

Previous wording

We are redeveloping PENN 2, a 1,795,000 square foot (as expanded) office building located on the west side of Seventh Avenue between 31st and 33rd Street. The development cost of this project is estimated to be $750,000,000, of which $659,108,000 of cash has been expended as of March 31, 2024.

Current wording

We are redeveloping PENN 2, a 1,795,000 square foot (as expanded) office building located on the west side of Seventh Avenue between 31st and 33rd Street. The development cost of this project is estimated to be $750,000,000, of which $675,504,000 of cash has been expended as of June 30, 2024.

Previous wording

We are also making districtwide improvements within the PENN District. The development cost of these improvements is estimated to be $100,000,000, of which $52,785,000 of cash has been expended as of March 31, 2024.

Current wording

We are also making districtwide improvements within the PENN District. The development cost of these improvements is estimated to be $100,000,000, of which $60,493,000 of cash has been expended as of June 30, 2024.

Previous wording

On August 28, 2023, we, together with Hudson Pacific Properties (“HPP”) and Blackstone Inc. (together, “HPP/BX”), formed a joint venture to develop Sunset Pier 94 Studios (“Pier 94 JV”), a 266,000 square foot purpose-built studio campus in Manhattan. We own a 49.9% equity interest in the joint venture. The development cost of the project is estimated to be $350,000,000, which will be funded with $183,200,000 of construction financing and $166,800,000 of equity contributions. Our share of equity contributions will be funded by (i) our $40,000,000 Pier 94 leasehold interest contribution and (ii) $34,000,000 of cash contributions, which are net of an estimated $9,000,000 for our share of development fees and reimbursement for overhead costs incurred by us. To date, HPP/BX has funded cash contributions equal to Vornado’s cash contributions. Future equity will be funded by HPP/BX and Vornado in accordance with each partner’s respective ownership interest. We have funded $7,994,000 of cash contributions as of March 31, 2024.

Current wording

On August 28, 2023, we, together with Hudson Pacific Properties and Blackstone Inc., formed a joint venture to develop Sunset Pier 94 Studios (“Pier 94 JV”), a 266,000 square foot purpose-built studio campus in Manhattan. We own a 49.9% equity interest in the joint venture. The development cost of the project is estimated to be $350,000,000, which will be funded with $183,200,000 of construction financing and $166,800,000 of equity contributions. Our share of equity contributions will be funded by (i) our $40,000,000 Pier 94 leasehold interest contribution and (ii) $34,000,000 of cash contributions, which are net of an estimated $9,000,000 for our share of development fees and reimbursement for overhead costs incurred by us. We have funded $19,494,000 of cash contributions as of June 30, 2024.

Previous wording

We may, from time to time, enter into guarantees including, but not limited to, payment guarantees to lenders of unconsolidated joint ventures for tax purposes, completion guarantees for development and redevelopment projects, and guarantees to fund leasing costs. These agreements terminate either upon the satisfaction of specified obligations or repayment of the underlying loans. As of March 31, 2024, the aggregate dollar amount of these guarantees was approximately $1,177,000,000, primarily comprised of payment guarantees for the mortgage loans secured by 640 Fifth Avenue, 7 West 34th Street, and 435 Seventh Avenue and the completion guarantee provided to the lender of the Pier 94 JV. Other than these loans, our mortgage loans are non-recourse to us.

Current wording

We may, from time to time, enter into guarantees including, but not limited to, payment guarantees to lenders of unconsolidated joint ventures for tax purposes, completion guarantees for development and redevelopment projects, and guarantees to fund leasing costs. These agreements terminate either upon the satisfaction of specified obligations or repayment of the underlying loans. As of June 30, 2024, the aggregate dollar amount of these guarantees was approximately $574,500,000, primarily comprised of payment guarantees for the mortgage loans secured by 7 West 34th Street and 435 Seventh Avenue, and the completion guarantee provided to the lender of the Pier 94 JV. Other than these loans, our mortgage loans are non-recourse to us.

Previous wording

As of March 31, 2024, we had construction commitments aggregating approximately $70,625,000.

Current wording

As of June 30, 2024, we had construction commitments aggregating approximately $45,819,000.

Previous wording

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of certain real estate assets, impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, depreciation and amortization expense from real estate assets and other specified items, including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO and FFO per diluted share are non-GAAP financial measures used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures employed by other companies. The calculations of both the numerator and denominator used in the computation of income per share are disclosed in Note 11 –(Loss) Income Per Share/(Loss) Income Per Class A Unitin Part I, Item 1 of this Quarterly Report on Form 10-Q. Details of certain adjustments to FFO are discussed in the financial results summary of our “Overview”.

Current wording

FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of certain real estate assets, impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, depreciation and amortization expense from real estate assets and other specified items, including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO and FFO per diluted share are non-GAAP financial measures used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures employed by other companies. The calculations of both the numerator and denominator used in the computation of income per share are disclosed in Note 12 –Income Per Share/Income Per Class A Unitin Part I, Item 1 of this Quarterly Report on Form 10-Q. Details of certain adjustments to FFO are discussed in the financial results summary of our “Overview”.

Previous wording

Below is a reconciliation of net (loss) income attributable to common shareholders to FFO attributable to common shareholders plus assumed conversions for the three months ended March 31, 2024 and 2023.

Current wording

Below is a reconciliation of net income attributable to common shareholders to FFO attributable to common shareholders plus assumed conversions for the three and six months ended June 30, 2024 and 2023.

Previous wording

(4)Includes variable rate debt subject to interest rate cap arrangements with a total notional amount of $1,034,119, of which $397,059 is attributable to noncontrolling interests. The interest rate cap arrangements have a weighted average SOFR strike rate of 4.50% and a weighted average remaining term of eight months.

Current wording

(4)Includes variable rate debt subject to interest rate cap arrangements with a total notional amount of $1,034,119, of which $397,059 is attributable to noncontrolling interests. The interest rate cap arrangements have a weighted average SOFR strike rate of 4.74% and a weighted average remaining term of ten months.

Previous wording

(5)Includes variable rate debt subject to interest rate cap arrangements with a total notional amount of $667,169 at our pro rata share. The interest rate cap arrangements have a weighted average SOFR strike rate of 4.59% and a weighted average remaining term of six months.

Current wording

(5)Includes variable rate debt subject to interest rate cap arrangements with a total notional amount of $244,883 at our pro rata share. The interest rate cap arrangements have a weighted average SOFR strike rate of 4.16% and a weighted average remaining term of one year.

Previous wording

The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt. As of March 31, 2024, the estimated fair value of our consolidated debt was $8,025,000,000.

Current wording

The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt. As of June 30, 2024, the estimated fair value of our consolidated debt was $7,997,000,000.